Staff Notice – the regulatory measure for placing cryptocurrencies under the law on securities
On August 24, 2017, the Canadian Securities Administrators published Staff Notice 46-307, which puts all coins or tokens under the law of securities, and that cryptocurrency ICO is under the control of Canada legislation. Participants in the trade with all cryptocurrencies should be referred to this law.
The Securities Act in Canada is within the framework of provincial legislation. The Staff Notice claims that, in addition to the fact that the initial offer of coins or tokens is unique, provincial laws will not treat them in a specific way, but will, like the SEC in America, continue to analyze tokens and coins as securities.
Recall, after SEC (U.S. Securities Exchange Commission), conducted an analysis called SAFT – Simple Agreement for Future Tokens for examine coin & token offers. Shortly after that, Canada introduced some similar measures. The cryptocurrency sellers who sell through bids are in a dilemma to explain that they are actually selling commodities or utilities, as legislatures do not accept this as an argument.
The Furtak vs. OSC case from 2016
In line with this, we have the example of Furtak, when this issue was selling licenses for using complex financial software agreements, which would allow the user to trade with future contracts. However, in these arrangements, users would meet with the issuer’s affiliates during contracts trade. They did not directly participate in making profits through these actions, but they received certain fees.
The Ontario Securities Commission described the financial flow as trading in securities, according to all its specificities and the ratio of risk capital used in company operations and investments where investors do not have the power to manage transactions. In Furtak’s picture, OSC has declared such a deal an investment contract.
Limited releases for issuers
It proves that Canadian province legislation treats tokens and coins as securities. Regulators in this country are ready to deal with ICO exchanges that accept the fact that cryptocurrencies fall under the law on them.
There are only limited reliefs for ICO issuers in specific cases. These exclusions do not make any drastic change. They are mostly limited to the period, the number of currencies traded, or require all necessary permissions from the regulator of a province.
Thus, for each issuer of tokens or coins, it is necessary to be aware that actually in Canada its actions mean that it trades with investment contracts and that it is under the control of the law on securities.